Monday, December 22, 2008

Financial Freedom

So you may wonder, why do I want to get out of debt and put money in savings? What's up with that? I do some talking on here about "financial freedom" and that's my end goal, but what does that really mean?

There isn't a hard and fast definition for financial freedom but to me it means having the ability to choose where and when I work and what I do without regards to money. It also means not owing anything to anyone except the debt of love (Romans 1:14). I would like to reach the place where I can give freely to those who need it. Although I do give now, I'm not able to give as much as I'd like due to bills/debts and my limited income. It would be wonderful to be able to go well above and beyond tithe. Here are some things I dream about doing someday when I'm financially free.

1)Carry $100 on me at all times so I can give the waiter/waitress a huge tip if I get really exemplary service.

2)Whenever I go out to eat or get coffee or something, pick one or more people to pay for and cover their bill.

3)Randomly pass out money around Christmas time to whoever suits my fancy.

4)Go on to Modest Needs and help out those people who need it in my community or in certain circumstances the really touch my heart.

5)Sponsor a child or children through a deserving non-profit.

6)Hop on to a sight like World Vision and give a donation to help provide for the basic needs of people around the world. I especially like the gifts that help produce a livelihood or are multiplied many times over. For instance, there is one option where your gift of $500 will be multiplied into providing $7,000 worth of necessities for children right here in the US.

7)Be able to pay off debt for my church.

8)Adopt more families from church at Christmas time.

9)Buying an apartment or house and renting it out really cheap to a family in need, or maybe even letting them live there for free until they get their feet on the ground again.

I'm also pretty excited about the idea of not working full time and being able to volunteer my time instead wherever I feel led.

So that's pretty much it. That's my goal with financial freedom. If you're trying to become financially free as well, what are some of your goals?

Tuesday, December 16, 2008

I got my CISSP results

... and I Passed!! Yay!!

I know this doesn't have anything to do with the financial part of my blog but I was just too excited not to post anything.

Friday, December 12, 2008

What is Debt?

It might seem like a simple subject to some but I've heard a few different opinions on what exactly debt is. I've known some people that only count certain types of payments as debt, saying, for instance, that an auto loan is debt but a mortgage isn't. I know that some people only count "good debt" as debt. Good debt is supposedly debt that makes you money, such as debt on a rental property.

Merriam-Webster dictionary defines debt as "something owed: Obligation; a state of owing". I find this interesting as I usually think of debt as money owed to one another. Debt can really be anything we owe to someone else. In fact, according to the Bible, the only thing we should owe each other is a debt of love (Romans 13:8) but that's a subject for another post.

So, by this definition, any type of loan would be a debt. I can see how some people might say "good debt" is better than "bad debt" but I would still count each as debt.

I think that also means credit cards, auto loans, student loans, other consumer loans (deals like 6 months same as cash), and mortgages. Mortgages would count as debt since you have a house but you owe the bank money for that house.

I've always wondered if bills would count as debt too. I think that they would since you owe the provider of whatever services bills you. For instance, I know I would count medical bills and bills from my college for tuition as debt. I'd be interested to here what you think. Do you think bills count as debt?

Wednesday, December 10, 2008

Our Debt Reduction Plan

So far, I have talked about two different Debt Reduction Plans which are prominent among people today; Crown Financial's Money Map and Dave Ramsey's Baby Steps. Now I'd like to tell you what my husband and I decided to do.

We combined elements of both and decided to move forward with what could be considered a Hybrid debt reduction plan. We both liked the foundational principles Crown had to offer so we set about accomplishing those as soon as possible. That means that we went out and had a will written up, made sure we were in the habit of tithing, got a clear picture of our net worth, and made sure we were covered by the right types and amounts of insurance. We decided not to follow some other items that were suggested, such as contributing the match amount on our 401K. Instead, we opted for the Dave Ramsey approach in that area and threw the whole thing at debt to get it paid off as soon as possible.

Another thing we liked about Crown's plan was their first real step. Start using a spending plan (they don't like the term "budget"). I know when we started really taking a look at where our money was going it was an eye opener.

The next point under Step 1 for Crown was the same as Step 1 for Dave Ramsey, creating an Emergency Fund and putting $1000 into it. Something we did as soon as possible.

Step 2 for both types of plans deals with paying off debt and I like Crown's approach on this more than Dave's. In Crown's plan, step 2 focuses on credit card debt specifically, Dave's focuses on all consumer debt. I think the fact that this is split up into two different steps on Crown's Plan is an advantage because it makes it feel like we've accomplished more.

We also like Crown's idea of saving money in your emergency account while also paying down debt. My husband prefers to save our money while I prefer to use it to pay down debt so this solution keeps us both happy.

Just as a refresher, we're on step 2 for each plan right now. We do have our credit card debt paid off but we're still working on getting that first full month of emergency fund saved up and the rest of our consumer debt paid off. That means that our next steps are 3 and 4 on the other two plans. It's at this point that we start shifting over to using Dave's Plan more than Crown's. Just a note, these steps might change since we're not there yet but as of right now here's what our next steps are:

Step 2) Pay off consumer debt/Save up 1 month's worth of Emergency Fund.

Step 3) Save up 6 months of living expenses in our Emergency Fund.

Step 4) Max out Roth IRAs and put in the company match amount for our 401k.

Step 5) Pay off our Mortgage.

Step 6) Start maxing out our 401K as well.

Step 7) Start saving any extra towards large expenses such as our next vehicles.

We also decided to take a page from Dave's book. Dave Ramsey is all about keeping you motivated to hit a particular goal. I don't know about most people, but I at least feel like indulging myself once in a while. In order to allow for some indulgences my husband and I decided to reward ourselves for completing each step along the way. As a reward from completing our next step we plan to save up for a trip to Ireland and a Patio Door. After completing step 3 we plan on remodeling our Kitchen or Bathroom (perhaps both). And so on and so on...

Once we hit Step 7 I would say we could count our selves as financially free. It will be great to be able to give more money away to charities or pay for another table's bill at a restaurant or leave a huge tip for a waitress/waiter who did a great job. Those are just some of the fun things I look forward to doing when we are financially free.

Monday, December 8, 2008

Here I am!

Sorry I haven't posted lately. I haven't run out of post ideas or forgotten about my blog but I've been preoccupied as of late.

The last week I was out of town attending all day study sessions for my CISSP which I took last Sunday. I was so exhausted after studying all day and then more at night from homework for my bachelor's that I didn't get to posting like I was hoping to. I am planning to put up a couple more posts this week so stay tuned!

Thursday, November 27, 2008

Happy Thanksgiving!

Happy Thanksgiving everyone!

I thought I would take this opportunity to share some things that I'm thankful for this Thanksgiving:

1) My health and the health of my loved ones.
2) My Husband
3) Our house
4) Our pets
5) Our cars
6) Our jobs
7) Random blessings from God
8) That I live in the United States of America
9) Parents who cook so much food that we come home with leftovers all the time
10)Life, I'm glad God decided to create me in the first place.

Friday, November 21, 2008

Crown Financial's Money Map

After covering Dave Ramsey's Baby Steps in my previous article, I would like to expand by talking about another plan we are following to get out of debt. It's called the Money Map by Crown Financial Ministries.

To give you some background, Crown Financial Ministries is a company founded in 2000 "dedicated to equipping people around the world to learn, apply, and teach biblical financial principles". They have a special outreach created to help teach these principles through small groups at various churches internationally. I have been through this class twice now; once by myself and once with my husband. I found that it was very helpful in getting your basics setup so you can start on the path to financial freedom. It covers core issues such as budgeting, giving, and our perspective on ownership of material items. I may go into more depth on that in the future but for now I want to focus on their Money Map.

The Money Map, similar to Dave's Baby Steps, is comprised of 7 destinations. Crown Financial differs from Dave in that they want you to work at several things at once. With Dave he emphasizes single minded intensity on whichever step you're on before moving toward the next. Also, with Crown Financial, they have steps that you should complete prior to starting the 7 destinations. The steps are labeled "Prepare for the Journey" and include the following:

1) Complete "My Life Purpose", "My Life Goals", and "Foundational Principles"
This is where you sit down either with yourself or your spouse and discuss your major goals and why you're going to do this journey.

2) Start giving to the work of the Lord - giving should be a regular part of our Christian lifestyle.

3) Read or listen to Your Money Map (A book that goes along with the study)

4) Execute a current will

5) Evaluate your career and income potential

6) If you have children, begin teaching them God's way of handling money

7) Acquire basic insurance, depending on your needs, age, and financial ability (auto, health, life, disability, and long-term care)

8)If you employer matches your retirement fund contributions, begin saving for retirement now as long as you can continue making consistent progress on the journey.

9) Make a list of all your assets and liabilities to get a clear picture of your net worth.

Not all of the items are tasks that you just check off, but rather, some are ways we should be living our lives during this process of getting out of debt and obtaining financial freedom.

Once the above items are taken care of then you can move on to the 7 destinations. You will see there is another way the Money Map differs from Dave's Baby Steps. Each destination has multiple things to accomplish underneath it. They are as follows:

1) Emergency Savings
Begin using a Spending Plan (or Budget as some may know it)
Save $1000 for Emergencies

2) Credit Cards Paid Off
Pay off Credit Cards
Increase savings to 1 month's living expenses

3) Consumer Debt Paid Off
Pay off all consumer debt (auto, student, personal loans)
Increase savings to 3 month's living expenses

4) Save for Major Purchases
Begin saving for your next car, a home down payment, etc.
Begin saving for retirement if you haven't already
Begin saving for your child's education

5) Buy Home and Begin Investing
Buy an affordable home
Begin prepaying the mortgage
Begin investing wisely

6) Home Mortgage Paid Off
Pay off your Mortgage
Fully fund your child's education
Make sure estate plan is in order

7) True Financial Freedom
Retirement is fully funded
Give more of your time and money

We're currently on Step 2 of this plan. Our credit card is paid off but we're still working on getting a full month's worth of living expenses saved up in our Emergency Fund. We're plugging away at it though.

Wednesday, November 19, 2008

Dave Ramsey's Baby Steps

As I said in an earlier post, I'm currently trying to follow Dave Ramsey's Baby Steps, as well as Crown Financial's Money Map. As you've probably figured out by the post title, I'd like to talk about Dave's Baby Steps today.

Dave Ramsey wrote an excellent book back in 2003 titled "The Total Money Makeover: A Proven Plan for Financial Fitness". In this book he outlines many sound financial principles and ideas (I highly recommend checking out a copy at your local library if you haven't read it). The key to these principles can be really summed up by his 7 Baby Steps. The gist of it, is that if you follow these steps you will gain financial freedom. So, without more ado, here are the steps:

1) $1,000 to start an Emergency Fund
Before you do anything you should have a small Emergency Fund so you don't have to fall back on going into debt when something unexpected happens. You'll notice I said when not if. :)

2) Pay off all Consumer debt using the Debt Snowball
In case you’re wondering what “consumer” debt is, that’s just debt outside of a mortgage. That would include credit card debt, auto loans, student loans, etc.

3) 3 to 6 months of expenses in savings

4) Invest 15% of household income into Roth IRAs and pre-tax retirement

5) College funding for children

6) Pay off home early
Dave also suggests that if you get a mortgage you get a fixed 15yr instead of a fixed 30yr so you build equity more quickly and pay less in interest over the life of the loan.

7) Build wealth and give!/Invest in mutual funds and real estate

We're trying to follow these steps right now and are on step number 2.

In case you're wondering what the Debt Snowball is, I think I can best describe it as a way to help motivate yourself into paying off debt. You start out by writing down all your debts. You then figure out how much money you have to put toward debt a month. After that you start putting whatever you can toward the smallest debt. Once you pay off the debt you roll the amount you were paying for that debt toward paying off the next smallest debt.

Let's say you have 3 credit cards. One has a balance of $4,000, the second has a balance of $500, and the third has a balance of $1000. Now let's say you have an extra $100 to put toward debt a month. Let's also say each of these credit cards has a minimum balance of $50 that you need to pay each month. So, you would start out by paying $150 per month on the $500 credit card until it was paid off. You would then roll over that $150 a month toward the $1000 credit card which would mean the payment on that is actually $200 a month ($150 + $50 monthly payment). After that's paid off you would do the same with the $4,000 credit card and would end up making payments of $250 a month on that. As you can see, the amount you put toward debt can quickly snowball into larger and larger payments.

Right now, my husband and I are on our last consumer debt. Once that’s paid off we’ll move on to step 3. I can’t wait!!

Saturday, November 15, 2008

God Rocks!

So I was checking my email today when I noticed I had an email from my university letting me know my payment was taken out for this month. I have been anticipating this for a while as they broke my payment up over this month and the month of December. However, I was expecting it to be several hundred dollars more than was stated in the email. In fact, they only deducted about $30. Since they have moved to a new payment system this year, and I have experienced several issues with that, I figured it was just another glitch. I logged in to see what was going on, hoping this didn't mean the payment next month would be doubled.

After reviewing the charges and credits to the account something just wasn't adding up. According to the university I only owed them another payment next month of $30. I tend to keep pretty meticulous track of finances so I know I didn't have the original number wrong. So what on Earth happened?!

Then I see it.

There is a credit showing up on the account of several hundred dollars from a memorial scholarship. It was enough to pretty much pay for the rest of the year.

Now, I've already been blessed enough to receive an academic scholarship based on my grades which covers about 25% of my costs. In addition to that, my work covers another 50%. So the fact that I'm getting 75% of my school paid for was already pretty exciting to me. This has enabled me to go back to school without needing to take out any loans. God decided to hook me up even more though because he's just cool like that. He really is the only explanation for this. I never applied for this scholarship. I had never even HEARD of it before! So when all is said and done, this scholarship basically pays for the other 25% of my tuition.

That's right, this semester I'm going to school at a private university for the low price of about $60. That brings me to the title of this post.

God Rocks!

Wednesday, November 12, 2008


Hello and welcome to Responsible Stewardship!

This blog started at the prompting of my husband. I currently subscribe to about 15 financial blogs, 1 financial forum, and am constantly reading financial books. I really enjoy learning about finances and can't wait to see what God has in store for my future. I've been insanely blessed so far. After a few months my husband and I decided to run this blog together since we handle all our finances together and he also enjoys blogging.

Our Goals for this blog are to keep us accountable for how we are doing when it comes to following Godly principles of handling money and also to help others if at all possible. We're currently trying to follow Dave Ramsey's baby steps as well as Crown Financial's Money Map. Feel free to look through some of the older blog posts to learn more about those. To see how we're doing following those steps look for the Quarterly Updates.

Thanks for visiting and I hope you enjoy!

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